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George Osborne: Hardly a born-again reformer (Horasis Global Meeting CC BY-SA 2.0)


To make tax more complicated is simple. Any Chancellor can do it, with the best intentions, which is why the tax code gets fatter and fatter, and the overburdened taxman keeps you waiting on the telephone. Making it simpler is hard, and harder than it looks. This is now Angela Knight’s job.

George Osborne’s Finance Bill, now going through Parliament, will establish the Office of Tax Simplification on a statutory basis, and she is his choice as simplifier-in-chief. Is he a born-again reformer? Not exactly. He has added his share of complications — to stamp duty, to inheritance tax — but when he set out to simplify tax credits, that web of complexity bequeathed by Gordon Brown, he ran up against the iron law of tax reform: losers shout louder than winners. They did, and they saw him off.

A reforming Chancellor likes to have cash in hand to oil the wheels of change, and this one has not been so blessed. So, when he first set a small team of reformers to work in the Treasury, they made little impact. They hit on the tax-free status of luncheon vouchers — a species which you may have thought had died out years ago. Serious reform would need more power to its elbow. Now he intends to provide it. An office established by statute can have independent authority. It will carry weight accordingly, as an example within the Treasury shows. The Office of Budget Responsibility has a robust chairman in Robert Chote, who has stood up to Chancellors before this one: just as well when, as recently happened, the rest of the Treasury is required to turn propagandist. Angela Knight needs to be no less independent, and no doubt she will be.

She is one of a strong-minded family of Sheffield steelfounders. She knows her way round the Treasury — she was a minister there in John Major’s time — and the City, where, running on to a hospital pass, she headed the British Bankers’ Association in their years of trial. As a reformer, she starts from the realisation that tax has not changed with the times, and will have to.

Pay As You Earn was invented a lifetime ago. For the first time, it swept most working people into the tax net. Some say that its inventor went on to be chairman of our biggest company, Imperial Chemical Industries, which had a vast payroll, and back offices to match. They could pick up the strain of administering the new tax, and National Insurance, too, the tax that dare not speak its name. In those days it was normal to work for such big employers and to stay there indefinitely. Today the mighty ICI has vanished in a puff of chlorinated smoke, and the scene has changed. For better or worse, the service industries dominate, we all move about more freely, and more of us — well over four million — work for ourselves. Nine-tenths of British companies employ fewer than ten people. All, though, are trapped in a system that posits an ICI-sized back office. Somebody has to do the tax collector’s work, and account for two tiers of National Insurance payments — the employer’s and the employee’s. On top of all this, a well-meaning government has imposed workplace pensions. Auto-enrolment, this scheme is called: a misnomer. For the hapless employer, it is like having to cope with a new and additional version of PAYE.

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